US Consumer Price Index will be key

In this regard, the March Consumer Price Index inflation data will be closely watched to see if it is near the 6% annualized rate reported in February, which would likely mean higher interest rates are coming from the central bank. However, analysts at TD Securities argued that core prices likely cooled off modestly in March, with the index still rising a strong 0.4% MoM, as they look for recent relief from goods deflation to turn into inflation this month. ´´Shelter prices likely remained the key wildcard, while slowing gas prices and softer food-price gains will likely dent non-core inflation,´´ they said. ´´Our MoM forecasts imply 5.1%/5.6% YoY for total/core prices.´´

We will also get the minutes of the Federal Open Market Committee, FOMC, on Wednesday and the analysts at TD Securities explained that the rate hike at the March FOMC meeting was widely viewed as dovish.´´ The analysts added that ´´the distribution of the March dot plot for 2023, however, suggested a more hawkish sentiment across the FOMC. With banking stress now appearing to be somewhat contained, the minutes for this meeting might emphasize this hawkish sentiment given continued elevated inflationary pressures.´´

Overall, with the June Federal Open Market Committee, FOMC, meeting remaining in play for a final 25bp rate increase, investors will have lightened their exposure to the Gold price in anticipation of profit-taking. However, as the analysts at TDS argued, ´´with Wednesday´s CPI print top of mind, the market has been unwilling to convincingly break lower, with CTAs needing to see prices below $1980/oz to further reduce length.´´

As for Federal Reserve chatter, the officials continue to stress that the central bank's policy path will depend on incoming data. For instance, Chicago Fed President Austan Goolsbee said the Fed should be cautious about raising rates in the face of recent banking stress. Meanwhile, New York Fed President John Williams explained that the prospect of the Fed raising its benchmark interest rate only once more and in a 25 basis point increment is a useful starting point.